Tree-Hitter Tercek Channels Goldman at Nature Conservancy

Mark Tercek; president and chief executive officer of the Nature Conservancy, sits for a photograph at the organization's headquarters in Arlington, Virginia. Photographer: Dave Lauridsen/Nature Conservancy via Bloomberg

May 31 (Bloomberg) -- On the day in May 2008 when Mark
Tercek, a managing director at Goldman Sachs Group Inc., got a
cell-phone call from a headhunter informing him that he’d likely
gotten the job of running the Nature Conservancy, he was so
excited that he backed his Jeep Grand Cherokee into a tree,
shattering the back window. Anxious that gouging a tree might be
a bad omen, he jumped out to see how bad it was. To his relief,
he’d done far more damage to his vehicle than the tree.

Tercek spent more than two decades on Wall Street, and none
of those years in green think tanks or chained to a bulldozer
blocking a logging road. As a city kid from Cleveland who camped
and hiked infrequently, he had come late to the joys of the
outdoors. Now, it appeared, he’d be leading the world’s largest
conservation organization, which has a million members, chapters
in 50 states and 34 countries, and more than $5 billion in
assets, Bloomberg Businessweek reports in its June 4 issue.

The Conservancy’s $1 billion in annual income dwarfs all
conservation competitors. And it had been run, for most of its
60-year history, by lifelong conservationists. Tercek had big
ideas about how to radically change the traditional approach to
solving environmental problems and improving the Conservancy’s
operations, but would career greenies listen to the theories of
a banker?

Reservations about his background quickly diminished after
he took the helm in July 2008: The stock market tanked, real
estate cratered, and the Conservancy’s donations and dues,
heavily timed to tax-related yearend giving, fell by 27 percent.
The organization’s $1.6 billion investment portfolio racked up
losses of $321 million by the end of fiscal 2009 -- especially
alarming because the fund typically covered 10 percent of
operating costs. The timing was perfect for a guy with a head
for numbers to save the day.

Cuts and Dismissals

Tercek quickly cut $80 million from the Conservancy’s
$530 million operating budget and ordered reductions of 9
percent of its 3,700-member staff in February of 2009, a painful
decision in a place full of passionate lifers. “I had to lay
off a large number of people that I really respected,” says
Peter Kareiva, the Conservancy’s chief scientist. “Yet
everybody realized Mark was right -- that he could prioritize,
see this unemotionally, that his Goldman experience was a
credit.”

Tercek, 55, didn’t come to the Conservancy to fight
financial brush fires. With the help of his board and the input
of the Conservancy’s 600 scientists, he wants to remake the face
of the American and global environmental movements. He has no
quarrel with the current model -- largely built on the
strategies of confront, litigate, regulate. But by itself, that
approach has proven inadequate. “All the things we care about -
- forests, coral reefs, fish stocks, biodiversity -- we have
less of instead of more of, despite everyone’s best efforts,”
Tercek says.

Including Polluters

Environmentalism, he fears, has become too elitist, too
white, too partisan, too full of doomsayers, too concerned with
saving nature from people instead of for them. He’d like to
expand environmentalism to include the world’s largest polluters
so that ecologists and corporations can work jointly to preserve
nature because it’s the smart economic choice.

He knows that there are “bad actors” who may never see
the light and that some of his more confrontational
environmental allies believe cozying up to polluters only serves
their greenwashing efforts. Greenpeace, for example, categorizes
the Conservancy as “a right-wing environmental organization”
and frets that collaboration with industry undermines the green
movement. In 2009 the Conservancy helped broker pollution
credits to three large U.S. corporations to protect Bolivian
forests. Greenpeace dubbed it “a carbon scam.”

Tercek counters: “Why wouldn’t we want to work with
companies with the biggest environmental footprints? It would be
irresponsible for us not to try.”

Published Poetry

With his pressed chinos, beige sweater, and polished
loafers, Tercek looks far more like a Harvard MBA (which he is)
than someone who studied English and published poetry as an
undergrad at Williams College (also true). At Williams he acted
in plays and seemed likely “to become an artist instead of a
business man,” says his wife, Amy Tercek, who has known him
since 1973, when they met in high school.

After getting his bachelor’s degree in 1979, Tercek
wandered to Japan to learn the language, teach English, and
study Aikido, the Japanese martial art. After two years, he
talked his way into a low-level data-crunching analyst’s job at
Bank of America in Tokyo, enjoying it far more than he expected.
By 1982 he was at Harvard; he joined Goldman in 1984.

‘Get Things Done’

Tercek made partner in 1996, demonstrating a willingness to
take on all manner of jobs, including corporate finance and real
estate. In 2005 he was named director of Goldman’s relatively
new Environmental Strategy Group, working to ramp up investments
in sustainable energy. His boss, Goldman CEO Hank Paulson (soon
to depart to lead George W. Bush’s Treasury Department), had
advised Tercek that it would be a good fit. “The thing about
Mark is that he knows how to get things done,” says Paulson,
now a senior fellow at the University of Chicago’s Harris School
of Public Policy Studies. “He knows how to execute.”

Tercek was in the class of 221 partners who shared in
Goldman’s 1999 initial public offering; Bloomberg News reported
that partners got stock options worth on average $63.6 million
at time of issuance. After much pondering, Tercek tossed his hat
into the ring for the Conservancy post. It was curiosity about
Tercek’s Goldman credentials that won him an initial interview,
but it was his obvious homework on the organization’s mission
and vision for where it ought to go that intrigued the search
committee. “Choosing Mark was a big step off of the traditional
path,” says Gretchen Daily, a Conservancy board member who is
director of the Center for Conservation Biology at Stanford
University. “But I have to say it’s been tremendous.”

Goldman-like Organization

In his spacious, light-filled office behind the glass-and-stone façade of the Conservancy’s building in Arlington, Va.,
Tercek is totally at ease. Six-foot-four, lean and fit, he wants
to make it clear that the Conservancy was a vaunted organization
before he arrived -- downright Goldman-like, in fact. To date,
the Conservancy has acquired more than 117 million acres of
environmentally significant land -- some of it donated, some of
it purchased -- which it typically sells to government agencies
to be turned into parks or preserves. “Think about it,” Tercek
says. “It was global, deal-oriented, entrepreneurial, scrappy,
pragmatic. It wanted to get stuff done. It bought things like a
merchant bank does. It took principal risks. It felt very
familiar to me.” And though it’s not Goldman money, he’s doing
fine. The Conservancy pays him $550,000 a year.

Partnership With Dow

Tercek’s biggest bet yet is the Conservancy’s five-year
partnership with Dow Chemical Co., announced a little more than
a year ago. During the project, 20 Conservancy scientists are
getting unprecedented access to Dow’s facilities, starting at
Dow’s sprawling Freeport, Texas, plant. The idea is to help the
chemical giant do an inventory of its global land and water
assets as a way of allowing Dow to put a value on its “natural
capital” and to determine how to best protect and enhance it.

“I know there’s a lot of skepticism about these corporate
initiatives, but for Dow to agree with us philosophically that
it relies on nature for business reasons and to begin to put a
business value on its natural assets, that’s huge,” says
Tercek.

There’s nothing new about environmental groups aligning
with corporations; indeed, core to the Conservancy’s success has
been its ability to raise huge sums from Big Business and use
the money to buy those millions of acres. But no green group has
ventured this far into the weeds with an industrial conglomerate
of Dow’s size, reputation, and reach to work on a project of
this ambition.

Contamination Alleged

Dow has annual sales of $60 billion, and its 5,000 products
are manufactured at 197 sites in 36 countries. It frequently
finds itself in court over pollution issues. For example, the
company is involved in a nine-year-old lawsuit filed by Saginaw
County, Michigan, residents alleging Dow is responsible for
dioxin contamination of a nearby river. While a state judge
denied class-action status to 2,500 plaintiffs last year,
individual suits are continuing. Dow says it will continue to
“vigorously defend” itself.

In the past, an industrial giant with a plant surrounded by
wetlands might have seen the marshes as a cheap place to dump
pollutants, laws notwithstanding, or simply as a nuisance that
brings constant battles with bird-watchers. But gains in
ecological science prove that wetlands are important natural
buffers against storm surges, never mind their value as
biodiversity havens and natural filters of water. If a company
is persuaded to see the marsh as “green infrastructure” --
that is, as an asset whose well-being enhances the security of
its plant -- it changes corporate thinking. Marsh conservation
becomes integral to the company’s business strategy.

Marsh or Concrete

Dow’s Freeport-area facilities cover 5,000 acres of land
and coastal marsh. Dow, increasingly concerned about the
vulnerabilities of its facilities to hurricanes, had been
thinking about building concrete flood walls through that marsh.
Conservancy scientists have persuaded the company to consider
marsh enhancement instead, though Dow says it’s premature to
speculate on an outcome and Kareiva, the Conservancy’s science
chief, says “careful engineering calculations” and modeling
studies will determine whether that’s a practical alternative.

If naturally enhancing the wetlands turns out to be the
solution, Dow would be putting a business value on its natural
infrastructure: It would get a relatively inexpensive barrier
against storm surges while fish and bird habitats get restored.
And the Conservancy will have scored a major coup if Dow takes
this theory and applies it globally to all manner of natural
assets -- and other big-footprint industrial conglomerates
follow suit.

‘No Road Map’

For its efforts, the Conservancy is getting $10 million
from Dow to cover its research costs -- an eyebrow-raiser for
environmental groups such as the Environmental Defense Fund,
which won’t take money from its corporate partners to avoid
accusations of greenwashing. “There’s no road map for this,”
says Neil Hawkins, Dow’s vice president of sustainability, “but
unless you start trying to put values on these assets it’s hard
to put that value into your global business strategy.”

Dow has agreed that the research will be published in
annual progress reports, and significant scientific studies that
come out of the collaboration will also be offered to peer-reviewed academic journals, meaning that failures and problems
will be published along with successes. The Conservancy won’t
work with companies that don’t meet those terms. Even so, “we
have to be careful,” Tercek concedes. “We don’t want to appear
to be fooling anyone -- or that we’re being used.”

Watchdog Doubter

You don’t have to go far to find doubters of this strategy.
“Oh, come on, Dow is awful,” says Anne Rolfes, head of the
Louisiana Bucket Brigade, a watchdog organization in New Orleans
that has sparred with the company over alleged pollution. “We
would never take money from them or partner with them.”

Kareiva sympathizes: “A community will have a bad
experience with a subsidiary and say, ‘Why are you working with
them?’ Our measure has to be net benefit on a global scale -- a
recognition that the earth as a whole will be better off, while
recognizing there will be local setbacks.”

On Tercek’s watch, the Conservancy has emerged from the
recession in stronger shape than ever. Despite that $321 million
loss to its portfolio in 2008-09, nobody panicked. Last year the
Conservancy earned $246 million in investment income alone, in
part by putting 17 percent of its $1 billion endowment in
rebounding hedge funds and an additional 19 percent in private
equity. Its nearest conservation rival in funding, the World
Wildlife Fund, has total revenue of under $240 million.

The ‘Wrestling Guy’

One Tercek move that won over the Conservancy’s demoralized
scientific staff was promoting Kareiva to the executive level
and insisting he be in the room when any major decisions are
made. Tercek calls him “my closest intellectual adviser.” The
other major staffing change was more startling; Tercek recruited
the “wrestling guy.” Hiring Geof Rochester away from World
Wrestling Entertainment two years ago to shake up the
Conservancy’s approach to membership and marketing is the
embodiment of Tercek’s expansive view of what conservation needs
to become.

Rochester, a 53-year-old African American who ran the
marketing for the WWE’s million-viewer pay-per-view
WrestleMania, is trying to apply lessons of relevancy and
longevity from the WWE to the Conservancy. “Wrestling started
in TV, and now look -- they’re in pay-per-view, books, movies,
DVDs, video games,” says Rochester. “Ultimately, the
conservation movement needs to appeal to its audiences in all
those platforms. We need reengagement with the public around the
world.” Conservation, he says, “risks becoming irrelevant if
it doesn’t change. Look at the demographics -- surveys show
30 million people consider themselves ‘engaged’ in conservation
in America.” Yet the same surveys count 130 million more who
are “concerned” but not yet members of green organizations.
Those are the people Rochester wants to reach.

Seeking Urban Preserves

Rochester has launched member initiatives in Hong Kong,
Australia, and Latin America with a goal of reaching 5 million
dues-paying members. There is also a push to create Conservancy
preserves in the heart of major cities, where the organization’s
work can be on better display.

When “Dr. Seuss’ The Lorax” opened recently, the
Conservancy negotiated a tie-in with its global tree-planting
program, an effort the group hopes to repeat. “We’re a brand,”
says Rochester, “and there’s no reason we can’t be recognized
in almost every country in the world.” Rochester says he’s
advocating more “evolution than revolution,” since the
Conservancy isn’t about to abandon its core mission of raising
money to buy conservation lands.

“That’s still incredibly valuable,” says Tercek, “and we
want to remain nimble and opportunistic in that regard. But we
now know this approach will never be enough. We just can’t buy
everything worth saving.”